BUS404: Risk Management

Unit 1: The Nature of Risk: Losses and OpportunitiesRisk management has become a focal point in business practices and
societal decision-making in the twenty-first century. The focus on risk
management has become particularly important with the recent crisis of
the global financial systems that arose with the failures in predicting,
preventing, and containing risk. As a focused field of study, risk
management draws on core knowledge from law, engineering, finance,
economics, medicine, psychology, accounting, mathematics, statistics,
and other fields to create a holistic and sustainable decision-making
framework. This unit introduces the fundamentals of risk management,
including the definition of risk and roles of risk in decision-making.
You will also learn to distinguish between different classifications of
risks and attitudes toward risk.

Unit1 Learning Outcomes
Upon successful completion of this unit, the student will be able to:
- Explain the concept of risk.
- Differentiate between risk and uncertainty.
- Define risk as a consequence of uncertainty and within a continuum
of decision-making roles.
- Describe the three major types of risk attitudes.
- Discuss how attitudes toward risk affect decision-making.

1.1 The Notion and Definition of Risk
- Reading: Risk Management for Enterprises and Individuals: “Chapter
1: The Nature of Risk: Losses and Opportunities:” “Section 1.2: The
Notion and Definition of Risk”
Link: Risk Management for Enterprises and Individuals:“Chapter 1:
The Nature of Risk: Losses and Opportunities:” “Section 1.2: The
Notion and Definition of
Risk”
(HTML)

Instructions: Please click on the link above, and read Section 1.2
of the textbook. Also, complete the Discussion questions at the end
of the reading. This reading defines risk as a consequence of
uncertainty. Pay attention to the Venn diagram in Figure 1.3, which
illustrates risk-reward outcomes. Please note that this reading
also covers the topics outlined in sub-subunits 1.1.1 through
1.1.3.

Reading, note-taking, and answering the Discussion questions should
take approximately 1 hour to complete.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

1.1.1 Risk as a Consequence of UncertaintyNote: This topic is covered by the reading assigned below subunit
1.1. In particular, focus on the text below the heading “Risk as a
Consequence of Uncertainty.”

1.1.2 The Role of Risk in Decision MakingNote: This topic is covered by the reading assigned below subunit
1.1. In particular, focus on the text below the heading “The Role of
Risk in Decision-Making” as well as review Figure 1.3.

1.1.3 Definitions of RiskNote: This topic is covered by the reading assigned beneath subunit
1.1. Focus on the text below the heading “Definition of Risk.”

Instructions: Please click on the link above, and read Section 1.3
in its entirety for an introduction to 3 major types of risk
attitudes: risk averse, risk seeker, and risk neutral. Also,
complete the Discussion questions at the end of the reading.
Remember to take notes as you read.

Reading, note-taking, and answering the Discussion questions should
take approximately 1 hour to complete.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: Please click on the link above, and read Section 1.4
in its entirety for an introduction to pure risks, speculative
risks, diversifiable and non-diversifiable risks, and enterprise
risks. Also, complete the Discussion questions at the end of the
reading. Note that this reading also covers the topics outlined in
sub-subunits 1.3.1 through 1.3.3.

Reading, note-taking, and answering the Discussion questions should
take approximately 1 hour to complete.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

1.3.2 Diversifiable and Nondiversifiable RisksNote: This subunit is covered by the reading assigned beneath subunit
1.3. Focus on the section titled “Diversifiable and Non-Diversifiable
Risks.”

1.3.3 Enterprise RisksNote: This subunit is covered by the reading assigned beneath subunit
1.3. Focus on the section titled “Enterprise Risks.” Study Figure 1.6,
and make sure you understand the concepts addressed in this figure
before moving on to the next subunit.

1.4 Where We Have Been – Key Takeaways
- Reading: Risk Management for Enterprises and Individuals: “Chapter
1: The Nature of Risk: Losses and Opportunities:” “Section 1.5:
Perils and Hazards”
Link: Risk Management for Enterprises and Individuals:“Chapter 1:
The Nature of Risk: Losses and Opportunities:” “Section 1.5: Perils
and
Hazards”
(HTML)

Instructions: Please click on the link above, and read Section 1.5
in its entirety. Also, complete the Discussion questions at the end
of the reading. Study the discussion on moral hazards carefully; in
this reading, you will learn the difference between perils and
hazards.

Reading, note-taking, and answering the Discussion questions should
take approximately 1 hour to complete.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Unit 1 Assessments
- Assessment: Pearson Education: George E. Rejda's Principles of
Risk Management and Insurance: “Chapter 1: Introduction:”
“Self-Assessment Quiz”
The Saylor Foundation does not yet have materials for this portion
of the course. If you are interested in contributing your content to
fill this gap or aware of a resource that could be used here, please
submit it here.